November was a good month for the TSX Index which was up 7.2% as were many indexes around the world as it appeared that raising interest rates by central banks was on hold. The TSX Index went on to greater heights and was up 10.1% over October 31, 2023 by December 14. The Canadian GDP however contracted by 0.3% in the third quarter while the US GDP was up 2.1% in the third quarter. Inflation rates weakened in October in both countries: Canada to 3.1% annually and the US to 3.2%. The overall outlook in Canada was little less rosy. With this background the following table lists the top and bottom performers for the month.
Dye & Durham (DND)
The No 1 performer was Dye & Durham Limited (DND) whose stock was up 72% on the month, but down 15% YTD and up 2% over the past year. This stock ranked 2nd from the bottom in September and has had a roller coaster ride for some time.
DND is a leading provider of cloud-based legal software and payments technology solutions designed to improve efficiency and increase productivity for legal and business professionals. It has approximately 1,400 employees and more than 60,000 customers around the world, with operations in Canada, the United Kingdom, Ireland and Australia, and more recently, South Africa. Management anticipates that by growing its business organically and through M&A over the long term, it will be successful in building the company to a billion dollars of adjusted EBITDA.
Results for the third quarter ending September 30, 2023 were announced at the end of October: Revenue at $120 million was flat compared to the prior period; Net loss was $13.5 million compared to a loss of $11.5 million; total debt was down $45 million and cash on hand was $20.4 million down some $20 million.
In late October DND announced a large refinancing of convertible debt to reduce outstanding by $95 million through the issuance of a new convertible debt issue. By December 7th the offer was to purchase existing $95 million convertible debt with a combination of cash and new debentures at a higher rate. This should result in 41% of company debt now fixed (vs 24%). DND believes this to be a useful move to secure more flexibility.
During the period one of the principal investors bought 300,00 common shares for $3 million; and management announced significant progress toward achieving a leverage ratio below 4 and that the strategic review of non core assets was moving ahead.
Shopify Inc (SHOP)
The no 2 performer on the month was Shopify Inc (SHOP) whose stock was up 51% , 110% YTD and 79% over the past year. This is another see-sawer: it was the 3rd worst performer in September.
Shop is a leading provider of essential internet infrastructure for commerce, offering tools to start, grow, market, and manage a retail business of any size. It is particularly attractive to small businesses and occupies a nascent software niche which is growing rapidly.
On November 2nd 2023 SHOP published its quarterly results for the period ended September 30, 2023. They were spectacular: Sales at $1.7 billion were up 25.5% over the prior period; Gross profit at $901 million was up 36.1%; Net income was $718 million compared to a loss of $159 million. In the nine months ended September 30, 2023, SHOP facilitated Gross Merchandise Volume (GMV) of $160.8 billion, representing an increase of 18% from the nine months ended September 30, 2022. Monthly recurring revenue at 141 million was up 31.8%. Cash on hand stood at $1.3 billion, down $324 million, partly to acquire marketable securities.
Lumine Group Inc (LMN)
The No 3 performer was Lumine Group (LMN) whose stock was up 35% on the month. Lumine Group acquires, strengthens, and grows vertical market software companies in the communications and media industry.
Its focus is on acquiring businesses with long-term growth potential, strengthening their core profitability, and making measured investments to empower growth.
This is a company (formerly a subsidiary of Constellation Software) who merged with Wide Orbit in February 2023 following a merger plan and subsequent reorganization (carve out). This was completed On February 22 and 23, 2023 at which time LMN became free standing with, Constellation as its controlling shareholder, with a public float owned by former Constellation shareholders and a public listing.
In the circumstances comparable figures are not entirely meaningful. Revenues grew 90% to $131.1 million and generated operating income of $45.1 million. However an expense of $194.8 million was incurred which obliterated the results, related primarily to the increase in fair value of the redeemable preferred and special securities (presumably related to the carve out) which is primarily dependent on the price movement of LMN’s subordinate voting shares. Meanwhile, there was $159.9 million cash on hand.
Unlock the Power of Informed Investing with 5i Research!
DIY investing doesn't have to mean going it alone. At 5i Research, we're your trusted partner in navigating the stock market. Our platform offers comprehensive stock and market research, empowering you to make smart investment decisions.
- Investor Q&A: Have burning questions? Get answers from our team of experts and fellow investors in our dedicated Q&A section.
- Research Reports: With over 60 meticulously researched Canadian stocks, our reports offer in-depth analysis, giving you the confidence to invest wisely.
- Model Portfolios, Alerts, Forums, Portfolio Tracking, and Much More...
CAE Inc (CAE)
The third worst performer was CAE Inc (CAE) whose stock was down 7% on the month, up 3% YTD and down 7% over the past year.
CAE is a technology company which digitalizes the physical world by deploying simulation training and critical operations support solutions. It is managed through three segments: Civil Aviation, which provides comprehensive training solutions for flight and other personnel; Defense and Security, which provides global training to ensure mission readiness; Healthcare, which provides virtual education and training solutions.
CAE announced pretty robust results on November 14th for the quarter ended September 30, 2023: Revenues of $1.1 billion were up 10% over the prior period, net income at $58.4 million ($0.18 per share) was up 31%; Adjusted order intake of $1.18 billion resulting in record $11.8 billion adjusted backlog. And the sale of the healthcare segment was announced subsequent to the quarter end. Management continues to target a three-year (FY22-FY25) EPS compound growth rate in the mid-20% range and expects this to be driven by the ongoing strong Civil performance and the multi-year transformation underway in Defense.
BRP Inc (DOO)
The 2nd worst performer was BRP Inc (DOO) whose stock was down 11% on the month, 19% YTD and 17% over the past year. It was the worst performer in August.
DOO is a global leader in the design, manufacturing and marketing of powersports vehicles. It has leading market positions in the snowmobile, personal watercraft (PWC), all-terrain vehicle (ATV), side-by-side vehicle (SSV), boat market, and the on-road three wheeled vehicle segment.
It got no help from the results for the 3months ended October 31, 2023 which encountered a decrease in the volume of shipments and an 8.9% decrease in revenues to $2.5 billion; net income at $63.1 million, was down 55.4% compared to prior year. Results were driven by a decrease in PWC and 3WV deliveries; supply chain issues; lower delivery throughput at the US-Mexico border. Management points out that the revenues for 9 months ended October 30, 2023 were up 10.3% and net income at $556.3 million was up 11.2%. Cash on hand at quarter end was $283,6 million.
Altus Group Limited (AIF)
The worst performer was Altus Group Limited (AIF) whose stock was down 15% on the month, down 26%YTD and down 25% over the past year. It ranked no 1 in August
AIF is a leading independent provider of real estate consulting services, real estate software applications and data solutions. With operations in four key geographies (Canada, the U.S., the UK and Asia Pacific), its products and services are used by banks, pension funds, insurance companies, accounting firms, real estate-oriented organizations, industrial companies and investors to evaluate real property assets.
While results for the 3 months ended September 30, 2023 were mixed: Revenues at $185.2 million were up 4.2%; Profit at $0.9 million ($0.02 per share) compared to $6.8 million ($0.15 per share) I the prior period. Profit was impacted by higher other operating costs; higher finance costs due to higher interest rates; changes in fair values of interest rate swaps. This industry seems to be faltering somewhat.
These are just some of the more than 60 Canadian companies we cover at 5i Research. To view their recent reports you can search for their tickers in the Reports section. If you are not a member and would like to gain access to these reports as well as the Q&A service where you can ask and search questions on these companies, you can fill in your information below to sign up for a free trial.
Take Care,
Disclosure: The analyst(s) responsible for this report do not have a financial or other interest in the securities mentioned.
Comments
Login to post a comment.